Finance Minister Nirmala Sitharaman is set to meet with heads of public sector banks (PSBs) and financial institutions to assess the progress of initiatives for foreign currency deposit mobilization and overseas borrowing. The meeting follows the Reserve Bank of India’s recent measures to encourage banks to attract foreign currency deposits from NRIs, OCIs, and PIOs.
Sitharaman will evaluate the mobilization of Foreign Currency Non-Resident (Bank) deposits, overseas foreign currency bonds, and external commercial borrowings by PSBs and financial institutions, including IDBI Bank. The RBI had removed the interest rate cap on fresh FCNR(B) deposits with maturities of three to five years until September 30 to help banks draw higher foreign currency deposits.
Furthermore, the RBI introduced a concessional foreign exchange swap facility for FCNR(B) deposits of three to five years, aiming to lower the hedging costs for banks. A similar concessional forex swap facility was also announced to encourage PSUs to raise funds through External Commercial Borrowings until September 30.
As a result, banks have seen a gradual rise in overseas funds flow, with expectations of further acceleration in collections this month due to increasing awareness among NRIs. Industry reports suggest that an estimated $3-4 billion has been mobilized through FCNR-B deposits as of July 3, with projections of increased inflows in the upcoming weeks, especially from NRIs in the Gulf region.
Moreover, bankers anticipate that the revised scheme will attract $40-50 billion in fresh FCNR-B deposits over time, indicating positive momentum in foreign currency initiatives.
